Overreaction effects independent of risk and characteristics: evidence from the Japanese stock market

Chiao, Chaoshin; Hueng, C. James

doi:10.1016/j.japwor.2004.04.003

Cited by 20 publications

(18 citation statements)

References 28 publications

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“…For the long term, only the return for the holding period of 15 months is significant. For the Japanese stock market, Chiao and Hueng (2005) document significant contrarian returns. Moreover, the returns persist after controlling for the size effect.…”

Section: Long-term Contrarian Strategymentioning

confidence: 99%

Emerging Markets and Financial Resilience

Hooy

Ali

Rhee

2013

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Section: Long-term Contrarian Strategymentioning

confidence: 99%

Emerging Markets and Financial Resilience

Hooy

Ali

Rhee

2013

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“…While studying the sources of an overreaction effect on the Japanese stock market, Chiao and Hueng (2005) show that the firm size (SZ) and the bookto-market ratio (BM) cannot fully explain stock returns on prior-return-based portfolios in Japan. They found that, after controlling for SZ and BM effects, the overreaction effect persists significant and plays an important role in explaining the zero-investment returns constructed by a contrarian strategy.…”

Section: Implications For Other Empirical Researchmentioning

confidence: 99%

Does the Tunisian Stock Market Overreact?

Dhouib

Abaoub

2008

World Scientific Studies in International Economics

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Research in experimental financial markets suggests that, most people tend to overreact to unexpected, striking, and more recent news, and underreact to ordinary or non-desirable new events. Many researchers document, as a result that, if one of these behavioral designs exist, then stock prices will follow a mean-reversion phenomenon due to investor's overreaction, and a momentum behavior due to investor's underreaction. This study investigates if such behavior affects stock prices on the Tunisian Stock Market. In other words, we tend to discover the eventual existence of return mean-reversion and/or momentum behavior on the Tunisian Stock Market over the period between January 1997 and December 2005. For this purpose, we have applied a contrarian strategy, which consists in buying the previous (12, 18, 24, and 36 months) loser portfolio and selling the past winner portfolio. Our results point out that, over periods of 18, 24, and 36 months, stock returns exhibit statistically significant mean-reversion phenomenon, while, over 12 months periods, stock returns present significant momentum behavior. This means that stock prices are predictable on the basis of their historical recordings without using any accounting data, in contrast to the weak-form efficient market hypothesis.

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“…1994; Elfakhani et al. 1998; Chiao and Hueng, 2005), there nevertheless exist a few exceptions. For example, Chui and Wei (1998) observe that BM fails to explain the cross‐sectional stock returns in Thailand and Taiwan.…”

Section: Introductionmentioning

confidence: 99%

“…While empirical evidence of a positive BM-return relation has been globally documented (e.g. Chan et al 1991;Lakonishok et al 1994;Elfakhani et al 1998;Chiao and Hueng, 2005), there nevertheless exist a few exceptions. For example, Chui and Wei (1998) observe that BM fails to explain the cross-sectional stock returns in Thailand and Taiwan.…”

Section: Introductionmentioning

confidence: 99%

The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

Chiao

Hung

Yao

2009

Japanese Economic Review

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This paper examines the absence of the book-to-market equity (BM) effect in the Taiwan stock market, applying the BM decomposition proposed by Daniel and Titman (2006). First, we do not observe a significantly negative correlation between future stock return and intangible return on research-and-development-intensive firms in Taiwan, which is inconsistent with the US evidence documented by Daniel and Titman. Second, undervaluation of research-and-development-intensive firms possibly leads to the absence of the BM effect. Those firms, most of which have low BM, perform well not only in the past, but also in the future, thereby obscuring the BM effect.j ere_485 289..299 JEL Classification Numbers: G12, G14.

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Overreaction effects independent of risk and characteristics: evidence from the Japanese stock market

Cited by 20 publications

References 28 publications

Emerging Markets and Financial Resilience

Emerging Markets and Financial Resilience

Does the Tunisian Stock Market Overreact?

The Absence of the Book-to-Market Effect in the Taiwan Stock Market: A Decomposition Approach

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